Riverfront Lofts Condo. v. Milwaukee/Riverfront

• Decision Date: 10 December 2002
• Docket Number: No. 01-C-0576.,01-C-0576.
• Citation: 236 F.Supp.2d 918
• Parties: RIVERFRONT LOFTS CONDOMINIUM OWNERS ASSOCIATION, Plaintiff, v. MILWAUKEE/RIVERFRONT PROPERTIES LIMITED PARTNERSHIP, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

236 F.Supp.2d 918

RIVERFRONT LOFTS CONDOMINIUM OWNERS ASSOCIATION, Plaintiff, v. MILWAUKEE/RIVERFRONT PROPERTIES LIMITED PARTNERSHIP, Defendant.

No. 01-C-0576.

United States District Court, E.D. Wisconsin.

December 10, 2002.

COPYRIGHT MATERIAL OMITTED

Morton M. Grodsky, Mequon, WI, for Plaintiff.

Stephen L. Fox, Brookfield, WI, for Defendant.

DECISION AND ORDER

ADELMAN, District Judge.

In this diversity case, an association of condominium owners sued the condominium developer for damages resulting from alleged defects in the construction of the building. The alleged defects included: (1) a facade which was separating from the building; (2) inadequate soundproofing; (3) insufficient access to air conditioners; (4) unfinished work in the common area stairwells and hallways; (5) defectively installed balconies; and (6) construction debris left on site. Plaintiff brought tort claims, claims for breach of contract, and claims under Wis. Stat. § 706.10(7) for breach of the implied covenant of workmanlike performance and reasonable adequacy for purpose.

Before trial, I dismissed plaintiff's tort claims as barred by the economic loss doctrine. The case was then tried to the court. After the trial, I rendered an oral decision and, pursuant to Fed.R.Civ.P. 52(a), stated findings of fact and conclusions of law. I indicated that the court had subject matter jurisdiction based on diversity of citizenship. Plaintiff is a citizen of Wisconsin. Defendant is an Illinois limited partnership, none of the partners of which are residents of Wisconsin. I also determined that the association of condominium unit owners had standing to bring the action, and that Wisconsin substantive law governed plaintiff's claims. I rejected plaintiff's breach of contract claims except for the claim relating to unfinished work in the stairwells and hallways for which I found defendant liable. However, I left open the question of damages. I rejected plaintiff's breach of implied warranty claim concerning the balconies but reserved decision on its other breach of implied warranty claims in order to do additional research.

I now address plaintiff's breach of implied warranty claims relating to defects in the facade, inadequate soundproofing, insufficient access to air conditioners, and construction debris left on site. I also address the issue of damages concerning defendant's failure to complete work in the stairwells and hallways. In the course of addressing these issues, I state additional findings of fact and conclusions of law.

I. FACTS

In 1991, defendant Milwaukee Riverfront Properties, L.P. ("MRP"), an Illinois limited partnership, purchased an approximately 100-year-old ten-story historic building bordering the Milwaukee River in downtown Milwaukee. Previously, the building contained commercial and unfinished warehouse space. Acting through its principal, David Zazove, MRP converted the building into luxury condominium units. Among other things, MRP subdivided areas, installed walls, new plumbing, heating and cooling systems, and hardwood floors and repaired some deterioration in the exterior facade. The resulting units have an open, loft style with hardwood floors, high ceilings and exposed duct-work and piping. Starting in January 1998, MRP began selling the units but retained ownership of portions of the common areas until January 2000, when it ceded control to plaintiff, Riverfront Lofts Condominium Owners' Association (the "Association" or "plaintiff"). I now turn to the relevant facts relating to each of the construction defects alleged by plaintiff.

A. The Facade

The Riverfront Lofts building has a brick and terra cotta facade. In December 1997, approximately one month before the sale of the first condominium unit closed, MRP hired Graef, Anhalt, Schloemer and Associates, a Milwaukee engineering firm, to complete a condition survey of the building (the "Building Condition Survey" or "Survey"). Bob Grothman, the author of the Building Condition Survey, testified that he inspected the facade by standing outside at street level and attempting to look at all four faces of the building using binoculars. However, he stated that he could not see the south and east faces, and could see very little of the north face.

Grothman testified that in the areas that he could see, the facade showed some deterioration and needed tuck-pointing, but was not "tremendously bad." Based on his observations and on the fact that he could not see most of the facade clearly, he recommended that MRP conduct a more detailed inspection. (See also Building Condition Survey, Trial Ex. 2 at 3-5 ("While the problem areas noted did not appear to be significant, a detailed inspection of the facade should be performed. This will insure that the minor deteriorated areas noted are not indicative of a more widespread or underlying problem that could have been missed from far away.").) Grothman also recommended that MRP repair spalls — areas where the concrete was chipping and falling off — on the elevator machinery room walls and on the exterior faces of the building, tuck-point brick joints, and treat the exterior brick with a penetrating sealer. He stated that deterioration would continue if not repaired. He testified that he had also observed that some pieces of brick had fallen from the building.

Zazove reviewed the Building Condition Survey and had the brick joints tuck-pointed and the spalls on the elevator machinery room walls repaired. However, he did not order a more detailed inspection of the facade or apply a penetrating sealer as the Building Condition Survey recommended.

Zazove testified that in 1998, MRP performed some ornamental work on the facade, which involved replacing some masonry at the base of the building and placing placards on the front face. Condominium unit owner, Fredrick Dichter, disputed this testimony but acknowledged that he did not move into the building until November 1998. I credit Zazove's testimony that MRP did ornamental facade work in 1998.

By 2000, the terra cotta and brick in the facade were spalling significantly. On August 18, 2000, at the request of the Association, Dan Cohen, an engineer, inspected the facade. He testified that he saw "large scale degeneration" and concluded that the building had not been properly maintained. He reported to the Association that:

Major repairs to the masonry and terra cotta are required. They are extensive and expensive. The present state of the exterior shell is one of disintegration and hazardous to pedestrians below....

The west and south terra cotta facing tiles are cracked, spalled and missing around the sills and window headers. Prior replacements used face brick.

The brick masonry parapet wall at the northeast is cracked and separated from the building wall with a large vertical crack.

The brick masonry back up for the terra cotta facing at the southwest corner of the building is vertically separated from the upper story.

Water penetration into the north concrete structural frame has caused the reinforcing steel to rust and spall the concrete cover over the steel.

All of the openings cut through the south wall for windows and vents are not sealed against the weather. Brickwork is incomplete.

(Trial Ex. 21 at 2.) He stated that repair of all four faces was necessary to maintain the structural integrity of the building and recommended that the Association solicit proposals from contractors.

Cohen also notified the City of Milwaukee, and the City inspected the property. The building inspector concluded that the deterioration of the terra cotta on the west facade was so extensive that it violated a City ordinance. Thus, on September 22, 2000, the City issued a notice of violation and ordered the Association to "[r]epair or replace all defective or deteriorating terra cotta" within thirty days. (Trial Ex. 3.) The City also ordered the installation of a canopy over the sidewalk adjacent to the west face to protect pedestrians from falling terra cotta.

Cohen testified that, in his opinion, the deterioration was present in December 1997; although, he acknowledged having been less certain in his deposition. MRP called William Dossett, a contractor, as a witness, and Dossett testified that he reviewed photographs of the facade (only some of which were taken before the Association had the facade repaired) and that, based on the photographs, he believed that in 2000 the building was in good shape for its age and not hazardous.

I find that the facade had deteriorated substantially by January 2000 when the Association took over the building. Cohen is an engineer with forty years of experience in the building industry. Thus, his opinion that substantial deterioration was present since late 1997 is entitled to significant weight.

Grothman's testimony did not contradict Cohen's. Grothman testified that in December 1997, he could only see the west face of the building clearly. Further, he recommended a more thorough inspection to "insure that the minor deteriorated areas noted [were] not indicative of a more widespread or underlying problem that could have been missed from far away." (Trial Ex. 2 at 3-3.)

To the extent that Dossett disagreed with Cohen, I give Cohen's testimony greater weight. Unlike Cohen, Dossett did not see the facade before it was repaired. In addition, Dossett's testimony that the facade was in good condition and not hazardous was not only inconsistent with Cohen's opinion but also with that of a City building inspector.

After the City ordered plaintiff to repair the facade, plaintiff asked MRP to do the work, but MRP declined. Plaintiff then solicited bids for the work from two masonry contractors and hired the low bidder, Holton Bros., which repaired the facade for $154,157. Thomas Holton, vice president of Holton Bros., testified that approximately ten percent of the terra cotta on all four faces was close to falling off, that substantial masonry work...